248 | Land Tax

NSW land tax is a charge on any land in NSW you hold as of 31 December unless an exemption applies.

NSW Land Tax

Who pays how much land tax on what? What should a business buying commercial property consider? And what are easy mistakes to avoid?

These are just some of the questions we ask Geoff Stein of Brown Wright Stein Lawyers in Sydney in this episode.

Here is what we learned but please listen in as Geoff explains all this much better than we ever could.

To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.

Land Tax

Land tax is an annual charge on land – any land unless an exemption applies – as of 31 December. So you start with all land being subject to land tax and then look for an exemption.

Land tax is not a period tax, but a point in time tax. And the point in time is the 31 December each year.

Land tax applies irrespective of whether the land generates an income or not.

Exemptions

There are 10 exemptions that might apply to the land you own.

1 – Principal place of residence
2 – Primary production land
3 – Boarding houses
4 – Low cost accommodation
5 – Residential and caravan parks
6 – Non-profit organisations
7 – Retirement villages, aged care and nursing homes
8 – Child care centres
9 – Crown or council land
10 – Land Valued Below Threshold

As long as one exemption applies to the land you own – no land tax to pay.

1 – Principal Place of Residence

Your principal place of residence is your family home. You can claim this exemption as long as at least one legal owner lives in the property. The exemption applies only once per household group and only for one property. 

You can claim this exemption even if you are just a beneficiary of a concessional trust, life tenancy or under the terms of a will.

2 – Primary Production Land

Farm land is exempt if it meets two conditions.

The first condition is that it must be mainly used for primary production selling the resulting product. This includes maintaining animals to sell their natural increase (for example cattle farming) or bodily produce (for example dairy). It also includes crops, bees, flowers, mushrooms as well as commercial fish and oyster farms. But it doesn’t include just maintaining plants or animals to sell to the public – for example a flower or pet shop.

The second condition is that the land must be zoned as rural, rural residential or non-urban land or otherwise – if not zoned as such – the land must be commercially used with an intent to make a profit on a continuous or repetitive basis.

3 – Boarding Houses

Your property qualifies as a boarding house if at least 80% of occupants are long term and you don’t charge more than the maximum tariffs. These maximum tariffs are updated each year by the NSW Chief Commissioner of State Revenue. For 2020 tariffs, click here.

4 – Low Cost Accommodation

Land is exempt if used for low cost accommodation within 5km of the Sydney General Post Office (GPO).

5 – Residential and Caravan Parks

A residential or caravan park qualifies for an exemption if more than 50% of its land is used as a home for retirees (retired or at least 55 years old).

6 – Non-Profit Organisations

Land owned or held in trust by a non-profit organisation is exempt unless used to make a profit. So schools, churches and charities usually don’t pay land tax.

7 – Retirement Villages, Aged Care and Nursing Homes

Retirement villages, nursing homes and aged care establishments are also exempt.

8 – Child Care Centres

Child care centres are usually exempt. To qualify you must be considered an educational or child care service under the Children (Education and Care Services) National Law (NSW) are exempt.

9 – Crown or Council Land

Only applies to leases entered before 1 January 1991 without any change of terms, so rarely applicable now. 

10 – Land Valued Below Threshold 

The threshold increases each year but is $734,000 as of 31 December 2020. Any land worth less than the threshold is not subject to land tax.

31 December 

Everything happens on 31 December. If you own land on that day, you pay land tax unless an exemption applies. If you sell before or buy after – no land tax for that year.

There is no pro-rata application. So if you sell on 1 January, you don’t just pay land tax for the one day. You pay the full amount. Land tax is not a period tax but a point-in-time tax.

Calculation

To determine the amount of land tax you pay as of 31 December 2020, check the total land value of all your properties.

If the total value is $734,000 or less, you pay no land tax. The value is within the tax-free threshold.

If the total value is between $734,001 and up to $4,488,000, you pay $100 plus 1.6% on any excess over $734,000.

And if the total value is over $4,488,000, you pay $60,164 plus 2% on any excess over $4,488,000.

Valuation

Land value is the unimproved value of your land. This unimproved value is determined by the Valuer General each year as per the Valuation of Land Act 1916, and is calculated as the average value of the past three years.

Land Tax Surcharge

If you are a foreign person who owns residential land in NSW, you pay a land tax surcharge. Please see ep 245 for more details.